October 18, 2010

Australian grains investment driven by falling US dollar

The weakening US dollar is encouraging Australians to invest in commodities like wheat, which is helping the prices of grains in the country to remain high.

Grain analysts say the damage to farmers from the rising Australian dollar would be much higher if the wheat price was lower. Speculative investment is flowing into the grains market, because it's cheaper to invest when the US dollar is low.

The Australian dollar hit parity with the US dollar on the weekend. Analyst Lloyd George said the rising Australian currency was making it harder for exporters.

"What becomes important in things like wheat, corn, and oilseeds is that, at the end of the day, while a low US dollar might increase speculative investment, it doesn't really change demand too much," he said.